Microvast Q1 2024 Earnings Call Transcript

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May 9, 2024

Key Takeaways

  • MicroVast reported a record Q1 revenue of $81.4 million, up 73% year-over-year, with gross margin improving to 21.2% (22.6% on an adjusted basis).
  • Sales in APAC and EMEA surged 640% and 184% respectively, driving a backlog of $348.3 million and reflecting strong commercial vehicle adoption.
  • Adjusted gross margin expanded by 9.1 percentage points year-over-year, while operating expenses rose due to higher headcount costs, resulting in a narrower GAAP net loss of $24.8 million versus $29.6 million a year ago.
  • For Q2 2024, the company expects revenue of $90 million to $98 million (midpoint +25% year-over-year) and targets gross margins of 20–25%, driven by ramping 48 Ah and 53.5 Ah cell production and new prototype deliveries.
  • MicroVast is expanding in North America—pursuing Canadian and U.S. specialty vehicle projects—while navigating U.S. financing hurdles and collaborating with German OEMs on a prototype fuel cell truck debuting at IAA 2024.
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Earnings Conference Call
Microvast Q1 2024
00:00 / 00:00

There are 3 speakers on the call.

Operator

Thank you, operator, and thank you, everyone, for joining us today. With that, I'll turn the call over to Chris. Thank you, operator, and thank you, everyone, for joining us today. With me on today's call are Mr. Yang Wu, Founder, Chairman and CEO and Ms.

Operator

Nancy Smith, Interim CFO. Mr. Wu will start off with a high level overview of the quarter before providing some operational updates. Ms. Smith will then discuss our financials in more detail before handing it back to Mr.

Operator

Wu to wrap up with our Q2 2024 outlook. Ahead of this call, MicroVast issued its Q1 earnings press release, which can be found on the Investor Relations section of the company's website, ir. Microvast.com. In addition, we have posted a slide presentation of the company website to go along with management's prepared remarks. As a reminder, please note that statements made during this call are forward looking and based on current expectations and assumptions.

Operator

They should not be relied upon as representative of views for subsequent dates, and we undertake no obligation to revise or publicly release the results of any revision to these forward looking statements due to new information or future events. Actual results may differ materially from expectations due to a variety of risks and uncertainties. For more information on material risks and other important factors that could affect our financial results, please refer to our filings with the SEC. We may also discuss non GAAP financial measures during this call. These measures should be considered in addition to and not as a substitute for or in isolation from GAAP results.

Operator

These non GAAP measures have been reconciled to their most comparable GAAP metrics in the tables included at the end of our press release. After the conclusion of this call, a webcast replay will be available on the Investor Relations section of the MicroBast website. And now, I will turn the call over to Mr. Wu for opening remarks.

Speaker 1

Thank you, And thank you everyone for joining today's call. Please turn to Slide 3 as I cover a few highlights from the Q1. The business posted record 1st quarter revenue with 73% growth year over year in Q1 2024. Delivery revenue of $81,400,000 We achieved this growth while maintaining a gross margin of 21 0.2%, a 10.9% point improvement year over year. This incredible growth comes largely from sales increases in our IPAC and EMEA businesses year over year.

Speaker 1

We saw triple digit percentage growth in both regions, 6 40% and 184% for APAC and EMEA respectively. Please join me on Slide 5. The company was successfully in expanding its commercial vehicle footprint with additional customers and projects in America and Europe alike. We have begun to tap into the Canadian market and are working with American LCV OEM for ramp up expected in the 2nd quarter. We closed the Q1 with a backlog of $348,300,000 and continue to strive for operational efficiency.

Speaker 1

The company posted significant improvements to adjusted gross margin at 22.6%, a 9.1 percentage point increase year over year. The company posted yet another banner quarter, and we expect continued growth and successes. So this also came with challenges. In addition to the current market sentiment facing the clean tech industry, we continue to navigate U. S.

Speaker 1

Financing hurdles. Turning to Slide 6. We have some exciting new customers in the United States specialty vehicle market and the European e trigger market. These customers will utilize Gen4 packs with our 53.5 amp hour cell technology. While we aren't quite ready to announce the projects publicly.

Speaker 1

We have made significant progress with the customers on product ramp up and as a prototype development. Additionally, we are excited to be working with German OEM engineers on the prototype fuel cell truck that will debut at IAA 2024. I would now like to turn the call over to Mrs. Smith to discuss our financials in more details.

Speaker 2

Thank you, Mr. Wu, and thank you for everyone for joining in. I'll spend the next few minutes discussing our quarter 1 2024 financial results. Please turn to Slide 8 and I will summarize the main line items from our Q1 P and L. We booked a record Q1 with quarter 1 revenue of $81,400,000 an increase of 73 percent from $47,000,000 in quarter 1 2023.

Speaker 2

This growth was driven primarily by strong sales demand at both our APAC and EMEA markets for commercial vehicles as OEMs continue to adopt our technology. Our gross margin improved to 21.2 percent in quarter 1, 2024 compared to 10.3% in quarter 1, 2023. After adjusting for non cash settled share based compensation expense in our cost of sales, adjusted gross margin increased to 22 0.6% in quarter 1 2024 compared to 13.5% in quarter 1 2023. That's a 9.1 percentage point improvement. Operating expenses were $40,900,000 in quarter 1 2024 compared to $36,200,000 in quarter 1, 2023, an increase of 13% from the prior year period.

Speaker 2

After adjusting for non cash SBC expense in SG and A, our adjusted operating expenses in quarter 1, 2024 were $30,100,000 compared to $19,800,000 in quarter 1, 2023, an increase of $10,300,000 This is mainly due to increasing headcount costs. GAAP net loss was $24,800,000 in quarter 1, 2024 compared to net loss of $29,600,000 in quarter 1, 2023. After adjusting for non cash SBC expense and changes in fair value of our warrant liability, adjusted net loss was $13,000,000 in quarter 1, 2024 compared to an adjusted net loss of $11,700,000 in quarter 1, 2023. The impact of these adjustments shown in Slide 9 and reconciliations of these non GAAP metrics to the most comparable GAAP metrics are included in the tables at the end of our earnings press release. Slide 10 shows the geographic breakdown of our revenue for quarter 1 2024 compared to the prior year period.

Speaker 2

As you can see, we booked outstanding sales increases. APAC sales were up 6 40% year over year and accounted for 29% of our revenue, up from just 7% a year ago. Our EMEA business was up by 184% year over year and accounted for 36% of our revenue, up from just 22% a year ago as key customers begin their vehicle ramp up. And with that, I'll turn it back over Wu to briefly go over our outlook for the Q2. Thank you.

Speaker 1

Thank you. Please turn to Slide 12, which provides a summary outlook for the upcoming months. For the Q2, we expect the revenue to be in the range of $90,000,000 to $98,000,000 up 25% from Q2 a year ago at the midpoint. This anticipated growth is primarily generated through increased deliveries to our APAC and EMEA commercial vehicle customers. We continue to strive for operational efficiencies, and we are maintaining our target gross margins to be in the range of 20% to 25%.

Speaker 1

For APAC, we will be delivering 48 amp hour and 53.5 amp hour cells from our Huzhou facility. We plan to do this while also targeting growth in Southeast Asia and a continuing R and D progress on the new upcoming products. In EMEA, we anticipate Q2 2024 revenue to grow more than double year over year, expected to deliver new prototypes to customers and plan to expand into additional commercial vehicle projects. For the Americas, we continue to focus on securing our Class Vial financing, while remaining committed to fulfilling planned customers and revenue growth. We are also continued exploring additional customer sales opportunities, including within the Canadian CV market.

Speaker 1

Thank you all for joining us today. We look forward to updating you on our progress again next quarter.

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